Reference no: EM132061085

Suppose that the Congress is considering the creation of a new education grant program aimed at addressing learning disability issues at the state and local level. The program would be funded through annual discretionary appropriations, with the money transferred to states through a population-based formula used by the Department of Education. The proposal is to appropriate $650 million for fiscal year 2019.

Your boss on the Senate Budget Committee has asked you to create a hypothetical 10-year baseline projection for the program, covering estimated costs for fiscal years 2019 through 2028. (Note: Since this is a brand-new program and 2019 will be the first year of appropriation, there are no “outlay priors” to worry about. Also, this will NOT be an 11-year set of estimates like some of the homework assignments; it will cover exactly 10 years only, starting with 2019 and ending with 2028.)

There is no history to rely on since this will be a brand-new program. However, the proposed grant program seems similar to a few other education programs that you are familiar with (since you are an education budget expert!), so you think you can use historical spending patterns for those similar programs to help create the baseline projection. You have identified historical average spendout rates to use for estimating outlays from new funding for the grants:

24 percent in the first year,

71 percent in the second year,

4 percent in the third year, and

1 percent remaining unspent (and eventually lapsing)

To inflate appropriations, assume that the baseline will reflect anticipated inflation of 2% per year.